APPRAISAL AND APPROVAL
This chapter is in two parts - part I, which gives the theoretical framework, and part II, which presents the appraisal and approval process in Pakistan.
PART I - THE THEORETICAL FRAMEWORK
11.1 Introduction
Project appraisal is also referred to as project analysis and is. undertaken to guide the decision-maker in accepting or rejecting an investment proposal through well laid Out decision criteria. The most important function of project appraisal is to evaluate the project’s ability to meet its avowed objectives and its ability to contribute towards the long term development and growth of the national economy.
One of the main reasons for undertaking appraisal is to prevent waste or misallocation of limited resources which have to be allocated between competing claims/projects. It is thus necessary in principle to define and value costs and benefits and, measure their impact on the development objectives. In some cases, it may be helpful to place a project in the sectoral context.
Project appraisal needs to answer two main questions
“Will the project as designed meet its own objectives as well as the larger needs of its location and the national economy?”
‘How does the project compare with other projects competing for the same funds?”
This becomes relevant when there is a budget constraint and many projects compete for the same limited funds.
Project appraisal requires analytical interpretation. It is more than just a set of techniques that can be applied to obtain ready made answers (This is important since resources are allocated in scenario where market prices do not equate the MSC and .MSV
the commodities.) In order to handle this problem, project analysis mak ...